Top 5 Most Predictable Currency Pairs for Q1 2018

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#1. Gold

Gold prices have been declining in the third quarter of this year. Price briefly rallied to the 1300.00 level before posting declines. In the longer term, the price action is evident of an evolving inverse head and shoulders pattern. The neckline resistance is found at 1300 – 1309 region. We expect to see gold prices declining towards the 1215 level.

Gold: Inverse head and shoulders pattern

This would be a good level to buy into the decline. A reversal near the 1215 level could mark the formation of the right shoulder. This could see gold prices attempting to post another rally to the 1300 level. Booking partial profits here and targeting the inverse head and shoulders target of 1450 or 1400 at the very least could be profitable. In the first quarter of 2018, we expect gold prices to consolidate around the neckline resistance level with a breakout likely into the second quarter next year.

#2. EURGBP

The EURGBP currency pair peaked near the 0.93 handle as the currency pair closed bearish. The previous few months have seen price action trading volatile around the 0.90 handle and the 0.87 level of support. We expect this volatility to continue. Brexit remains the main theme in EURGBP. There are potential signs that the BoE could turn hawkish however, this is broadly depending on how the Brexit negotiations work out with the EU.

EURGBP: Short term rebound to 0.90

From a technical perspective, we maintain the downside bias in EURGBP. In the first quarter, EURGBP could be seen attempting to retest the 0.90 handle. This will mark the retest of the breakout level and following a reversal here, further declines are expected. By the end of first quarter 2018, EURGBP could be seen trading back at the current levels of 0.8700.

#3. EURJPY

The EURJPY has managed to lift off from the 124.00 level this year. With price action now clearing the 129 level, the bias remains to the upside. EURJPY could be seen finally testing the resistance level near the 138.94 level. However, we expect to see some downside in the near term.

EURJPY: Buy the dip to 129

EURJPY could be seen falling to the 129 – 126 region where support is seen. Establishing support at this level could see the currency pair attempting to test the upper resistance level easily. However, watch for any downside risks on a close below the 126.80 level. A break down below this support level could signal downside declines back to the 124.00 support level.

#4. EURUSD

The EURUSD has had a rather flat couple of months. Price action has been steadily hovering around the 1.17 and 1.18 levels over the past few months. This comes as the ECB signals a smaller pace of QE purchases. In the first quarter, we expect to see the euro attempting to rally back to the 1.1900 level. Filling the gap at this level will suggest exhaustion to the downside.

EURUSD could retest 1.1900

The euro currency is expected to remain range bound in the first quarter with the risk of a downside decline to 1.13 level in the longer term horizon. This bearish bias shifts only in the event that the EURUSD manages to rise above the 1.1900 level with bullish conviction.

#5. WTI Crude Oil

WTI Crude oil prices managed to lift off in 2017. Price action in the third quarter saw a steady gain in price as oil prices are seen rising to a two-year high during the third quarter. The gains in oil prices come amid November’s OPEC decision to extend the production cuts into 2018.

WTI: Buy the dip to $53

The oil cartel has been attempting to cut back on production in a bid to push oil prices higher. However, the U.S. shale oil producers are seen taking advantage of the somewhat higher oil prices which could see some downside risks. For the first quarter of 2018, we expect oil prices to remain near the current levels.

Any downside declines will be supported near the $53.00 handle. The breakout from the inverse head and shoulders pattern suggests that oil prices could being to rally from around the $53.00 price level. We maintain the long term bias towards $75.00, however the gains to this level will be gradual.

Hopefully you found this list to be useful. If we have enough comments, we will continue with this list every quarter. 2017 has been awesome for us and 2018 will even be greater.

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